Caltex Australia Starts Review of Refineries as Margins Drop

By James Paton -
Aug 22, 2011

Caltex Australia Ltd. (CTX), the nation’s
biggest oil refiner, started a review of its refineries after
reporting first-half profit dropped 24 percent as a record
Australian dollar hurt margins for turning crude into fuel.

“We have initiated a review to understand the role the
refineries will play in maintaining continuity of supply to our
customers,” Julian Segal, chief executive officer of the
Sydney-based company, said today in an earnings presentation,
citing the “challenging environment in which we operate.”

Caltex, half-owned by San Ramon, California-based Chevron
Corp. (CVX), operates the Kurnell refinery in Sydney and the Lytton
refinery in Brisbane. Royal Dutch Shell Plc (RDSA), Europe’s largest
oil company, said last month it would halt refining operations
at its Clyde plant in Sydney before mid-2013, saying it was no
longer regionally competitive against Asian “mega-refineries.”

“Despite improvements in the regional supply-demand
balance, the refiner margin continues to be uncertain due to the
continuing strong Australian dollar,” Caltex said.

Caltex rose 1.9 percent to A$10.03 at 1:37 p.m. Sydney time,
compared with a 0.2 percent gain for the S&P/ASX 200 Index.

Operating profit was A$113 million in the six months ended
June 30, compared with A$149 million a year earlier, the company
said in a statement. Caltex said in June it expected profit,
excluding the impact of changes in oil prices, of between A$100
million to A$115 million.

The oil refiner’s profit, including gains in the value of
inventories, increased 91 percent to A$270 million, Caltex said.
Caltex had expected profit to rose to between A$255 million and
A$275 million on that basis, the company said in June.

Caltex estimated today that the Australian government’s
plan to introduce a price on carbon emissions will cost the
company A$5 million to A$10 million in the first year of the
program.